Case Study Phase 1-3 Family Business Elin Bjornback

22 March 2013

Table of Content

H&M SHORT HISTORY ............................................................................................................................... 1 H&M BUSINESS IDEA AND BRANDS ...................................................................................................... 1 H&M FAMILY AND OWNERSHIP ............................................................................................................. 2 FUTURE CONCERNS ....................................................................................................................................... 4 FOURTH GENERATION ....................................................................................................................................................... 4

LETTING GO ......................................................................................................................................................................... 4

OWNERSHIP STRUCTURE .................................................................................................................................................. 5

BIBLIOGRAPHY ............................................................................................................................................... 6 APPENDICES ..................................................................................................................................................... 7

APPENDIX 1: FAMILY TREE .............................................................................................................................................. 7

(H&M is not my family business but through my three cousins, the third generation, I have strong ties to the business).

H&M Short History

My cousin Karl-Johan Persson has been the CEO of the Swedish fashion chain H&M since 2009 and is the third generation to be involved in the company. His father Stefan Persson (my godfather) was CEO between 1982-1997 and has since 1998 been the Chairman. The business was founded in 1947 in Sweden by entrepreneur Erling Persson and was quickly established as a fashion brand across the country. H&M stands for Hennes & Mauritz (hennes means hers in Swedish, representing the main target market, and Mauritz represent the male attire store acquired in 1950s in order to expand further). The first expansion outside Sweden started in 1964 when opening in Oslo, Norway. The business went public in 1974 to fund further expansion plans. H&M is today the second largest global clothing retailer, after Inditex, with 2,800 stores in 48 countries with a total number of staff reaching 105,000 (H&M, 2013).

H&M Business Idea and Brands

The business idea of the company is to provide fashion and quality at the best

price, selling clothes, shoes, accessories and beauty products for women, men, teens and
children. The clothing lines are very diverse, including everything from basics to party attire. In addition to clothing, H&M offers interior fashion through H&M Home, often incorporated 1

within the usual stores. In 2004, H&M became more recognizable through the new concept of introducing a new designer collaboration each year. Unique and creative clothing lines has since then been especially designed by, for example, Karl Lagerfeld, Stella McCartney, Roberto Cavalli, Matthew Williamson and Versace (H&M, 2013). H&M is also the mother company several fashion brands. The more upscale fashion chain COS (Collection of Style), which was founded by my cousin as his first project for the H&M Group. COS is today present in 15 countries. Other brands include Weekday, Monki and Cheap Monday, which all have their own stores. In March this year, H&M:s latest development & Other Stories was launched (H&M, 2013).

H&M Family and Ownership

H&M became public in 1974 in order to fund the future expansion. In Sweden, there are two types of shares in the market, A- and B shares. The A-share gives the owner the right to more votes. In most of the cases, the B-share represents only 1/10 as many shares as an A- share. The H&M share (B-share) is traded on the OMX Nordic Exchange Stockholm, Sweden. The H&M share capital consists of 194,400,000 A-shares (10 votes per share) and 1,460,672,000 B-shares (1 vote per share). The total number of shares is 1,655,072,000. Already in the 80s, the founder Erling Persson allocated his shares in H&M between his three children, two daughters and son Stefan Persson. Even if the daughters received shares it was Stefan who received the majority. The two daughters were instead given exclusive properties around Stockholm, Sweden. I believe this decision was made because both Erling

and his children knew that if H&M was to be part of the Persson Family in the future and avoid difficulties, only one child could be the majority owner of the votes. Currently, Stefan Persson and his three children are the majority owners of H&M and have 37.7% of the total shares (including all available A-shares) and 69.7% of the total votes, while his sister Lottie Tham and her family is the second largest (please see the 10 largest owners in the chart below). Stefan Persson and his three children have collected their shares in a company called Ramsbury Invest AB. When it comes to managing the ownership, the family is considered to be using professionalism (Berent-Braun, and Uhlaner, 2012), by not interfearing with the business and always put the interest of H&M and other shareholders first.

(Ownership Structure H&M, taken from hm.com)

Future Concerns

Fourth Generation
From the start in 1947 there has always been one family member actively working in H&M, but will it be in the future? The fourth generation is all under 10 years old today so it is an issue for the long-term but should be considered. Knowing my cousin, he would never push his children into H&M just because it is their family business and legacy. But at the same time it would be quite sad to see no member of the founding family involved. So, should he push his children into H&M or just accept that the family might not be actively managing it in the future? Or is there a way in between?

Letting Go
Trust is considered to be one of the most important factors for a successful succession (Filser et al, 2013). For how long will my godfather Stefan Persson remain as the Chairman of H&M? He has held this position since 1998 and shows no sign of letting go. To work as CEO in a business where your father is the Chairman is not an easy task. Since H&M is a well performing business the relationship between father and son seems to be healthy, but what can be done to keep it positive and that no tensions arise that would have a negative impact on business performance? 4

Ownership Structure
Another concern, the main one, is what will happen with the ownership. When my godfather Stefan Persson is not around anymore, how will the A-shares be allocated? Will my cousins agree on letting one of them be the majority owner and in control of the votes? My godfather and my cousins might already have solved this issue, I do not know. One thing is for certain, not all three children and their children will be able to control everything together, it will be too divided and there is a greater risk for the family to loose H&M. What should the family consider when determining future ownership?

Bibliography

Berent-Braun, M. and Uhlaner, L. (2012). Responsible ownership behaviors and financial performance in family owned businesses Journal of Small Business and Enterprise Development, 19(1), pp. 20-38. Emerald Group Publishing Limited (online). Available at: http://www.emeraldinsight.com/journals.htm?issn=1462- 6004&volume=19&issue=1&articleid=17015652&show=abstract Filser, M et al. (2013). Psychological Aspects of Succession in Family Business Management Management Research Review, 36(3). Emerald Group Publishing Limited (online). Available at: http://www.emeraldinsight.com/journals.htm?articleid=17075259 H&M. (2013). About H&M. Available URL: http://about.hm.com/content/hm/AboutSection/sv/About.html H&M. (2013). Full Year Report 2012. Available URL: http://about.hm.com/content/hm/AboutSection/en/About/Investor- Relations/Financial-Reports/Financial-Reports.html#cm-menu 6

Appendices

Appendix 1: Family Tree

Erling Persson Founder

Daughter I (deseased, two sons not working in the business)

Stefan Persson Chairman (3 children, only one working in the business)

Daughter II (3 children, none working in the business)

Karl-Johan Persson CEO (2 young children)